Much has been theorized about the way the feds will be going forward with the BTC they seized from SR servers so far (26k BTC) and those that they will potentially be seize from Ross Ulbricht in the future (up to 600k BTC or 80M USD in BTC).

I wonder how they are going to proceed with those moneys, will they either liquidate them for USD in a public auction (like commodities or real estate) or will they just delete them like other illegal forfeited substances? Will they maybe liquidate them on the open market thus potentially crushing Bitcoin/USD price?

There may be an exception to this guidance applicable in our case, because:

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Seized cash, except where it is to be used as evidence, is to be deposited promptly in the Seized Asset Deposit Fund pending forfeiture. The Chief, AFMLS, may grant exceptions to this policy in extraordinary circumstances. Transfer of cash to the U.S. marshal should occur within 60 days of seizure or 10 days of indictment.

It can be argued that the BTC serve as evidence in the case because they show where they came from and can potentially be traced back to seller and buyers engaged in illicit activities on the Silk Road. On the other hand the BTC themselves are not needed to provide this kind of information and may be liquidated because all the transaction histories are already in the blockchain and the BTCs themselves are known to the feds already. There may also be intelligence on the origins of those funds on the serves the feds seized along the SR bust.

---If the feds are concerned about the fluctation in Bitcoin price they are also allowed to sell

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Users Bitcoins Seized by DEA: The DEA consolidated the regulations for seizure and forfeiture in October 2012. This included “… Sec. 8.14 {which} adds a provision to the Department’s regulations allowing for the pre- forfeiture disposition of seized property when the property is liable to perish, or to waste, or to be greatly reduced in value while being held for forfeiture, or when the expense of holding the property is or will be disproportionate to its value.”

Seized cash, except where it is to be used as evidence, is to be deposited promptly in the Seized Asset Deposit Fund pending forfeiture. The Chief, AFMLS, may grant exceptions to this policy in extraordinary circumstances. Transfer of cash to the U.S. marshal should occur within 60 days of seizure or 10 days of indictment.

It can be argued that the BTC serve as evidence in the case because they show where they came from and can potentially be traced back to seller and buyers engaged in illicit activities on the Silk Road. On the other hand the BTC themselves are not needed to provide this kind of information and may be liquidated because all the transaction histories are already in the blockchain and the BTCs themselves are known to the feds already. There may also be intelligence on the origins of those funds on the serves the feds seized along the SR bust.

With regard to the first issue, I am pretty sure Bitcoin would not be considered "foreign currency" even if it is considered "currency" at all. Arguably, it does constitute "seized cash." However, even if it does, the exception for use as evidence would apply at least until there is no chance of it being used as evidence. If it is not cash, however, it could be treated as the feds treat any other seized commodity, and sold at auction at some indefinite future date, subject to internal rules and regulations of the agency. Even then, of course, it could be subject to the "evidence" rule and kept indefinitely.

The disposition of the DPR case might not resolve the issue, as it may still be "evidence" in other cases. If the feds were actually seeking to maximize the value of their holdings (which they often don't do much to do such as by selling properties often on the cheap at auction), they'd find any excuse to hold onto it as long as possible before liquidating.

There might also be some procedure for anyone whose business through SR was entirely legitimate to make a claim on any seized funds. That, of course, assumes there are any such people who would be willing to expose their identities.

True, at least to people who know Bitcoin, but they're doing this in front of a judge and (maybe) a jury. So the less they have to explain, the better, and explaining how something is evidence when they don't even "have" the "money" any more may be beyond the ken of the average juror (or judge).

True, at least to people who know Bitcoin, but they're doing this in front of a judge and (maybe) a jury. So the less they have to explain, the better, and explaining how something is evidence when they don't even "have" the "money" any more may be beyond the ken of the average juror (or judge).

They aren't meant to do anything with it until after they get a guilty verdict anyway.

If they do dispose of it, it goes to the forfeiture fund.http://www.justice.gov/oig/reports/2013/a1307.pdfIf the trial goes on for a significant length of time the amount may significantly impact the fund's operations and perhaps encourage other cases that may result in seizures.

I believe, if I've read it correctly, that they actually do have access to the SR hot wallet funds, or at least, I believe that's what the seized non-DPR BTC are. So we may see them attempt to liquidate those funds sooner than the DPR funds, especially if they don't end up prosecuting anyone over them. At least the owners of unquestionably illegal proceeds are very unlikely to come forward and make a claim on them, and even people who were selling something legal in their own jurisdiction (like PlutoPete), may be unwilling to make a claim on funds in the United States, where selling paraphernalia may be illegal (ask Tommy Chong), if only because they'd effectively be waiving a jurisdictional claim by coming forward and submitting their claims to a US court.

This is for the hot wallet on the server. Coins were still flowing into it long after the raid.The enforcers had control of the server for more than a month before the raid. When someone has control of the hardware, it is very difficult to secure against that.It is not like he had a Trezor dongle hanging off of it or anything...